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Northland Capital Partners View on the City 3Legs Resources, Paragon Diamonds, Savannah Resources, Starcom Plc and others

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Paragon Diamonds (LON:PRG) – BUY*: Interim results
Market Cap: £14m; Current Price: 4.8p; Target Price:  10.5p (from 12.9p)
LBT remains flat and extension to the Mothae exclusivity period secured

  • LBT stayed flat at £0.5m in H115 compared to H114. Net debt of £3.3m in H115 compared to £2.3m in H114.
  • Paragon has agreed an extension to the exclusivity period with Lucara until 07/10/15.
  • Paragon is concluding the funding for the Stage 1 production at both the diamond projects to be announced as soon as practicable. The Company has also received a formal letter of commitment from a separate investor for the majority of the Stage 2 financing for both projects.
  • Paragon has agreed an extension to the £500,000 loan facility to the 07/10/15 (option to extend to 14/10/15) from 30/09/15.
  • Production at Mothae targeted for six months after the acquisition has been closed with production at Lemphane expected in H116.
  • BUY rating maintained but forecasts downgraded and price target reduced to 10.5p from 12.9p.

NORTHLAND CAPITAL PARTNERS VIEW: Paragon Diamonds’ interims were largely in line with our FY15 expectations. The delay in the finalisation of the funding arrangements for both the acquisition of Mothae and Stage 1 production at both Mothae and Lemphane is expected to be temporary. In our forecasts, we have pushed out the timing of first production from both the Stage 1 and Stage 2 plants at Lemphane and made several other adjustments that have led to a downgrade in our price target from 12.9p to 10.5p. It is important to note that we have not yet factored the effect of the Mothae acquisition into our forecasts or price target until the deal closes.

 

Savannah Resources (LON:SAV) – CORP: Interim results
Market Cap: £4.7m; Current Price: 1.9p
LBT widens during a year of major developments

  • LBT increased to £1m in H115 from £0.9m in H114. Net debt of £0.1m in H115 compared with net cash of £1.3m in H114.
  • At the Mutamba-Jangamo Heavy Mineral Sands (HMS) Project, Savannah will commence evaluation work once the joint venture with Rio Tinto has received approval from the Ministry of Mineral Resources and Energy of the Republic of Mozambique.
  • The phase 1 programme is expected to be an initial reconnaissance exploration programme to detect zones of high grade HMS. Following this scout RC drilling on the targets generated and a scoping study will be completed.
  • At the Oman Copper Project, Savannah is planning a downhole EM survey to optimise targeting for further drilling at Block 5. While at Block 4, the Company is developing a RC drill programme over selected VTEM targets and drilling is anticipated to commence in Q415. Savannah is also planning an additional sampling programme to test the extent of gold mineralisation at the Salahi 1 Prospect, where trenching results include 12m at 11.87g/t Au (SCH16).

NORTHLAND CAPITAL PARTNERS VIEW: Since the start of the year, Savannah Resources has signed a joint venture with mining major Rio Tinto on the combined Mutamba-Jangamo Heavy Mineral Sands Project. Alongside this the Company has also continue to advance both the copper and gold targets on its interests in Oman. Savannah is just waiting for Ministerial approval so it can commence work in Mozambique and will begin drilling during Q415 in Oman.

 

3Legs (LON:3LEG) – CORP: Investment and interims
Market Cap: £1.9m; Current Price: 0.3p
Investment in cancer immunotherapy

  • Subscribed £215k for new shares in SalvaRx, a company owned by Jim Mellon and Dr Greg Bailey, that owns 60.5% of iOx Therapeutics, a new company that is developing a series of compounds for cancer immunotherapy. Mellon and Bailey, who are NEDs of 3Legs and own 29.9% of 3Legs, are also subscribing £215k on the same terms. 3Legs holds 11.1% of SalvaRx post investment.
  • SalvaRx has a strong management team with considerable experience in the field of cancer immunotherapy. IOx’s technology is based on compounds that stimulate invariant natural killer T cells and preclinical testing in several models suggests the compounds can inhibit the growth of tumours.
  • Interims: strategy refocused to become a life sciences investing company with £1.3m of funding secured as part of this, including £500k from Mellon and Bailey. Two thirds of the loss of £248k related to the costs of winding up the former business. Period end cash of £1.2m with the £1.3m placing offset by the £1.1m final return to shareholders.

NORTHLAND CAPITAL PARTNERS VIEW: The management of SalvaRx has a strong track record in cancer immunology with Ian Walter, MD, formerly of Britol-Myers Squibb, where he managed physicians overseeing the development of several oncology compounds. He is joined by Rob Kramer, Chief Scientific Officer, who was Head of Oncology Discovery Research at Bristol-Myers Squibb and Jansen Pharmaceuticals.

 

Starcom (LON:STAR) – CORP: Director change
Market Cap: £4.0m; Current Price: 4.1p
NED steps down

  • Martin Bloom, who has served as a Non Executive Director since the company’s IPO in February 2013, has stepped down in order to focus on his other business activities.
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Power Capital Global (LON:PCGB) – CORP: Interims
Interims

  • H1 results reflect the end of the company’s natural resource trading operations. There was no revenue and the operating cost base was substantially reduced to £179k (H1 FY14: £729k). Further cost reductions have been made post period end.
  • Monies from PCG Coal (Indonesia) and TSI Holdings are still outstanding. Management plans to dispose of its investment in Asia Pacific Investment Partners at the earliest opportunity.
  • Directors will dispatch a circular to shareholders convening a general meeting to adopt an investing policy to make investments in the gaming, leisure, entertainment, gambling and associated financial product sectors in Asia.
  • Shares were suspended on June 12th given its low levels of cash. The suspension is ongoing. The board will seek to have this suspension removed on a recapitalisation of the group or as part of a reverse takeover.

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